There is a market for people’s labour, just as there is a market for any other good or service. Producers need workers to produce goods: this is the demand for labour. And workers have the ability to offer labour to producers: this is the supply of labour. The labour market refers to the interaction between the demand and supply of labour. It is the labour market that determines how many jobs there will be, where these jobs will be and the pay levels in these different jobs.
The worker’s wage (pay) is the price of labour. As with prices in any market, wages go up when there is high demand and low supply of labour in the labour market. So, in order to receive a relatively high wage in the labour market, a worker needs to possess competencies, skills, qualifications and experience that are in high demand but low supply.
Within the labour market of the economy, there are distinct labour-market segments. It is common, for instance, to have a ‘flat’ overall labour market with high levels of unemployment (where the supply of labour is greater than the demand for it) but particular industries or occupations that cannot satisfy their requirements for labour. Labour markets also differ between geographic regions: rural regions commonly experience lower demand for labour than urban areas.
Many other factors can also affect particular labour markets. That is why there are widely differing levels of employment and pay in different industries, occupations and regions.
On the demand side, these factors include the following:
- the level of productive activity requiring certain types of labour
- whether new technology is being used to replace labour
- whether new technology requires new forms of labour.
On the supply side, the following factors affect labour markets:
- the size of the working-age population (workforce)
- the strength of worker or union bargaining power and the presence of industrial action to support it
- the competencies, skills, qualifications and experience needed to perform the job
- the conditions of work (e.g. risk, unpleasantness or location)
- the unique talents needed in some industries (e.g. the talents of performers in the rock music industry and athletes in sports industries).
Labour-market trends
There have been significant changes in Australian society and business in the last 30 years. Many of the changes in the business world have been aimed at making producers more efficient and competitive. They have had an impact on the number of jobs and the types of jobs available.
Changes in the business world
Technological change
In 1976, the first microprocessor set in motion an era of rapid technological change: an era dominated by computer technology. The rate of technological change is rapidly increasing, and workplaces need to be able to integrate technology successfully to ensure their continued success.
Economic change
Since the 1980s there have been a number of structural changes in the Australian economy. Many of these changes have been aimed at making Australian business more internationally competitive. The Commonwealth government has actively introduced the following far-reaching reforms:
- deregulation of the financial system (e.g. foreign-owned banks were permitted to conduct business in Australia)
- reductions in tariff protection for Australian producers, particularly manufacturers (a tariff is a tax on imports that make them more expensive)
- microeconomic reform in the transport and communications industries
- restructuring of industrial awards (agreements which set workers’ pay and conditions on an industry-wide basis).
Changes in training
Changes in training have occurred across all industries, but especially in the trades. These changes have been aimed at breaking down strict lines of demarcation between different trade occupations, promoting greater multi-skilling in the workforce.
Enterprise bargaining
Since 1991, there has been movement away from a centralised industrial relations system to a system of enterprise bargaining. Workers’ conditions and rates of pay are now more commonly determined at individual workplaces or firms (enterprises) rather than across whole industries. The new process is broadly supported by all the parties involved in industrial relations.
Decline in trade union membership
The trade union movement exercised substantial influence in the setting of wages in the 1980s and the first half of the 1990s. However, during the same period, the proportion of employees who were trade union members fell, as shown in the graph below.
Globalisation
Every day Australian businesses trade with businesses overseas. Australia Is now part of the global economy. There has been a huge growth in the importance of the South-East Asian and East Asian regions to the Australian economy; the boom economies of the so-called ‘Asian tigers’ are now seen as key targets for Australian businesses.
Overall labour-market trends
Unemployment
In recent decades, the demand for labour has been insufficient to employ the Australian workforce in total. In the last 30 years, high and persistent levels of unemployment have been common in the Australian workforce. In the last 10 years Australia’s unemployment rate has slowly declined from 9% in 1995 to 5% in 2005, as shown in the graph below.
Women
The greater participation of married women in the workforce has a large effect on the supply of labour. In the last 30 years the proportion of women in the workforce has increased rapidly. From a base of 35 per cent in 1970, the workforce participation rate of married women has now reached over 55 per cent.
In comparison, the participation rate among unmarried women is only slightly higher than it was in 1970. The participation rate for men during the same period has fallen from 83 per cent to 73 per cent.
Young people participating in education
There has been a significant increase in young people’s participation in education. The proportion of young people staying at secondary school in Australia to Year 12 has increased from 34.8% in 1981 to 73.4% in 2001, and continues to increase. The number of young people in higher education (post-secondary education) has increased by a similar proportion. As would be expected, with this trend has come a decline in full-time workforce participation by young people.
Part-time work
Part-time and casual work have become a more important part of the labour market. Around 1 job in 4 is part-time, compared with 1 in 10 in the 1960s. Part-time employment increased by 30 per cent between 1990 and 2001, and continues to grow.
Because part-time work can be compatible with undertaking a course of study, there has been a marked increase in part-time participation in the workforce by young people. Today, 65 per cent of full-time students are in the part-time workforce.
Educational level of the workforce
The proportion of the workforce with post-school qualifications has increased over the last two decades from 37 per cent in 1980 to well over 50 per cent today. Work-based training has also been increasing during the same period. Australia has a workforce that is both more qualified and more skilled than it was in 1980. The trend can be expected to continue.
Working hours
Another interesting trend in the labour market during the 1980’s and 1990’s was the increase in the proportion of full-time workers, particularly males, who have been working long hours (more than 49 hours a week). However, the 00’s have seen a dramatic shift, with more men limiting their working hours to give more time to family and leisure commitments. Between 1982 and August 2000, the number of men working 50 or more hours a week almost doubled from 752,000 to 1,425,000. But in the four years to August 2004, their numbers fell by 61,000, despite strong growth in the number of men with full-time jobs
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Earlier this month we saw an announcement that troubled retail group, RED group, the owner of the Borders and Angus & Robertson bookshops would close the last nine remaining Borders stores in Australia, with the loss of another 315 staff members by the end of July.
